FAQs About 1099-K Forms

Many taxpayers receive 1099-K forms come tax season. These forms are a type of information return that is used to report certain types of payments received by a taxpayer during the year. Unfortunately, there is a lot of confusion about 1099-K forms, which can lead to costly mistakes when filing one’s return. To help you avoid this, we’ve included a few answers to the most frequently asked questions about this type of tax form.

What is Form 1099-K? 

As a type of information return, 1099-K forms are used to report payments that a taxpayer receives from:

• Credit, debit, or gift cards; or
• Payment applications or online marketplaces for goods or services.

Taxpayers should receive this form if they sold a good or provided a service and were paid through an online marketplace, a payment app, or a credit card in an amount that exceeds the reporting threshold. Besides having to report this transaction when filing a tax return, a qualifying taxpayer may also owe a payment to the agency if he or she gained on the sale or received a payment for the services provided. Taxpayers can use the information on the form, as well as other tax records to determine how much, if anything, is owed.

What Information is Reported On a Form 1099-K?

 A 1099-K form should include specific information, including the total or gross dollar amount of a person’s payment transactions. It’s important to note, however, that this amount will not include adjustments for credits, fees, refunds, shipping, or discounts. In fact, these amounts can be deducted from the gross amount when filing one’s tax return.

What is the Threshold Reporting Amount? 

While there isn’t a threshold amount for those who receive payments via payment card transaction (i.e. credit cards, debit cards, and store-value cards), there is such a limit for other payments. Under these federal reporting rules, only taxpayers with more than 200 transactions involving total gross payments to a third party settlement organization (TPSO) for goods and services exceeding $20,000 will receive a Form 1099-K. The most common form of TPSO is a digital application used to handle monetary transfers between buyers and sellers.

Do I Have to Report These Payments on My Tax Return? 

The Form 1099-K reporting threshold doesn’t affect whether a person must also file a tax return or whether the payments in question are taxable. This is because all income, regardless of the amount is taxable, unless the tax code specially exempts it, so even if a taxpayer didn’t receive a Form 1099-K, he or she could still owe taxes on those payments and still needs to report the payment on their tax return.

Set Up a Free Consultation Today

If you received a Form 1099-K and have questions about how it affects your tax filing obligations come tax season, please call 386-490-9949 and set up a free one-on-one consultation with experienced CPA, former FBI Special Agent, and Florida and nationwide tax return preparation lawyer Ronald Cutler, P.A. today.

Sources: 

irs.gov/pub/taxpros/fs-2024-03.pdf

irs.gov/newsroom/irs-revises-and-updates-frequently-asked-questions-about-form-1099-k